Looking good: With a provocative image and exclusive market position, Abercrombie & Fitch and its Hollister brand has carved an enviable niche. And it is now expanding in the UK. Noella Pio Kivlehan reports
Abercrombie & Fitch takes marketing very seriously. Announcing its opening in London in 2007, images of trendy, sexy semi-naked young people in provocative poses were plastered on the sides of double-decker buses. Model-like teenagers were hired to serve in its store.
But when it comes to glamour, A&F can claim quite a heritage – film stars Greta Garbo, Katharine Hepburn and Clark Gable are said to have bought the attire, as did President John F Kennedy. On a darker note, Ernest Hemingway is said to have purchased from an Abercrombie & Fitch store the double-barrelled shotgun with which he committed suicide.
The Hemingway link might not be something the company wishes to shout about, but it’s a strong image – and image is something A&F knows all about.
Since 1992 and the arrival of chief executive officer Mike Jeffries (see panel), what had become a rather dowdy clothes retailer has been transformed into a highly dynamic and covetable brand, thanks in no small part to its provocative advertising campaigns and exclusive market position.
Almost two years since opening in London its first flagship store outside of the US, the company, which is made up of five separate brands (see panel), has plans to continue growing – despite the global recession – and to buildon its image.
To do this, it is initially using the Hollister brand, aimed at late teenagers, which it is rolling out in the UK with much success. A flagship Hollister store opened in Bluewater, Kent, in January. Stores in Westfield London and Brent Cross opened in October last year.
London is just the start. “All major [UK] cities are candidates for our brand we look for leases on properties of around 8,000sq ft or 750m2 in malls [for Hollister],” says an A&F spokesman, adding that Abercrombie & Fitch will be flagships throughout the world “whereas Hollister will be mall locations, as well as flagships”. True to the company’s word, Hollister West Quay in Southampton are expected to open by this summer.
“Given the success of the A&F flagship store in London, we see the UK as an important strategic staging ground for the roll-out of our brands internationally,” the spokesman adds. Targets include premier cities across France, Germany, Spain, Italy, the Netherlands, Denmark, and Switzerland.
The spokesman explains the thinking behind the foreign expansion thus: “We are operating with almost 600 stores across the US, so the opportunities for store growth and volume are greater for us abroad than domestically.
“We also believe our brands have been widely sought after throughout Europe and Asia.”
Expanding during a recession throws up its own problems as shoppers become more savvy with their money, but there are other barriers to entry into the UK.
Deborah Parker, an analyst with PricewaterhouseCoopers, believes that: “It is really difficult to see a US company working in Britain because they are not used to the high property costs, but it may work in the big shopping centres.”
Indeed, when Jeffries finally opened his flagship store on Savile Row, between Regent Street and Bond Street, on 22 March 2007, the UK’s opaque rental system was deemed to be a problem. One agent, who didn’t want to be named, says A&F asked what other similar retailers were paying. “But when they were told that it wasn’t information we’d have, they then asked if the landlord would have it. We said no.”
Such a question is understandable given how the US system operates. “There are a lot of differences [to opening in Britain], but in terms of property, the five-year rent review is a clear difference,” says the A&F spokesman.
“In the US, rents due under a lease throughout its term are agreed at the outset.” However, says the spokesman: “When we entera market we are always in ‘test mode’ which means we proceed cautiously. It’s the same with our plans for the UK.”
Even with the recession biting, A&F could have timed its expansion perfectly. Jonathan de Mello, director of retail property with Experian, believes that it is a good time for US retailers in general to enter the UK market because of the cost of property here. However, he adds: “It clearly depends on how the retailers are doing in their own country.”
While on the whole A&F is doing okay, it is still being hit by the recession. In February, A&F shares rose following reports that its January same-store sales had fallen less than analysts had expected. One reason for this, say analysts, is that A&F won’t discount its merchandise on the same scale as that of other retailers.
Hollister’s net sales rose by 11% to $530.9m last year. And at the end of Q4, Abercrombie had 447 Hollister stores compared with 390 stores the year before and 201 Abercrombie stores compared with 177 stores the year before.
On wanting to protect the image of the brand, Jeffries said last month, after the results were released: “Our brands represent highly productive, consistent businesses that are the result of an unyielding focus on merchandise quality and customer experience.
“We continue to make strategic investments in the business to sustain and enhance brand quality and to support future growth, both domestically and internationally.”
In the long run, this can only be a good thing. As Richard Collyer, retail director of NB Real Estates, who acts for Hollister in the UK, says: “Abercrombie does not go in for sales as it believes it would hurt the brand in the long term the company sees itself as being aspirational.”
If the company can prove its worth and grow during a recession, then its youthful image should be around for a long time to come.
Abercrombie’s chief executive officer does not look 63. Usually bedecked in trademark flip-flops, Abercrombie jeans, and sporting blond cropped hair, Mike Jeffries is the embodiment of the brand he joined in 1992 to breath new life into a company which had been flagging in the 1980s.
Jeffries’ ideal was that he wanted A&F to “sizzle with sex” – and he has succeeded. Today, Jeffries, said to be intensely private, has retained complete control over every aspect of the multi-billion dollar company, from clothing designs to the positioning of in-store fixtures.
Opinions in the market are very much divided about Jeffries. One retailer says that under Jeffries’ directorship, Abercrombie is one of the “few brands out there that transport the actual lifestyle. From the moment you enter the store you are experiencing the Abercrombie style. You don’t see the products, you see the lifestyle – it is such a confident statement”.
Another says: “A&F is a mass retailer. For Jeffries it’s not about the number of stores. If Louis Vuitton is in a mall then Jeffries wants to be there with them.” Another developer states: “The only criticism I have is that there is no flexibility in how they work. They have their terms and stick to them.”
But no matter what the opinion is about Jeffries, there’s no denying that he has made a success of the brand.
Abercrombie & Fitch Established in 1892 by David Abercrombie, who was joined by Ezra Fitch in 1900. The store was originally a sports and excursion outfitters. It went through a repositioning at the end of 1999 when it decided to downplay the logo merchandise in the stores and refocus on the college customer. It now has four off-shoots:
Hollister launched in 2000 after chief executive officer Mike Jeffries identified a gap in the market for14- to 18-year-olds. It began a major roll out across the US in 2001. At the time the merchandise was priced about 30% below the Abercrombie & Fitch adult stores. There are now 447 Hollister stores in the US.
Abercrombie kids Themed as “classic cool” for 7 to 14-year-olds, this is the children’s version of Abercrombie & Fitch. Uses blue (against the A&F grey), blasts music from young artists, and uses all-lowercase lettering on its marketing trademarks.
RUEHL No.925, or simply RUEHL, is an upscale American lifestyle brand. It is inspired by the artistic and cultural heritage of New York City’s Greenwich Village, says A&F. The target market is aged 22 to 35 and the aim is to hold on to A&F customers as they mature. RUEHL retails its apparel, leather goods, and lifestyle accessories through its stores and ruehl.com.
Gilly Hicks The women’slingerie/swimwear concept was first launched in Natick, Massachusetts, in January 2008. A&F says it plans to open at least 800 Gilly Hicks stores. But a company spokesman says: “Gilly Hicks will prove itself first in the US. We would then consider rolling out Gilly as we did for Hollister.”
